Hong Kong travel diary: It’s good to be home

At the risk of imposing a serious ear worm: we don’t know how lucky we are here in New Zealand.

My colleague Dr Bryce Wilkinson and I are now back in New Zealand, brimming with ideas from our comparative research study into Hong Kong’s social issues.

We are working on three reports: one on poverty, one on inequality, and one on welfare. Our research in Hong Kong will most strongly influence our report on welfare, where we will be making a number of policy recommendations. All three reports will be ready in time for the 2017 election, so do keep an eye out for them.

There are many things New Zealand can learn from Hong Kong.

But there are also some things that New Zealand is getting right. In fact, if policy continues to move in the direction of the initiatives below, our system could some day be world leading, and truly worthy of having overseas experts come to study it.

I would like to take this opportunity to celebrate these things.

The first thing worth celebrating is the actuarial approach to our welfare system. As one of the National Party’s most significant reforms, the approach is both innovative and compassionate. The actuarial approach gathers data on beneficiaries and their outcomes. With this evidence, policy-makers can assess who is most likely to be on a benefit, how long they are likely to remain on a benefit unless there is intervention, and what outcomes they are likely to achieve.

This then allows better targeting of resources to society’s most vulnerable, as well as better tracking of their lifetime outcomes. It is compassionate because it does not withhold support for those who need it most. For those who genuinely fall on hard times, there is a social safety net available. However, it also ensures that those who are fit and able to move off the benefit, do so. While this may not sound compassionate for those who see unconditional welfare benefits as a right, there are personal, social, and financial advantages to be gained in employment.

Surprisingly, in Hong Kong, many of the benefits and subsidies available are not particularly well-targeted. To put this in perspective, nearly 50 percent of the population live in some form of subsidised or public housing. While eligibility for public housing is means-tested, it becomes very difficult to move tenants out of public housing once their circumstances improve. In many cases, the tenants are simply required to pay more in rent as their incomes increase. However, this does not solve the problem that demand for public housing is high (there is up to a 3 year wait), and supply is constrained.

Although evidence gathered from Hong Kong’s poverty line could be used to guide policy, there is little data available at the moment on the outcomes of the most vulnerable groups. That means the aid provided may be inappropriate or poorly targeted.

The second thing to celebrate is the move towards tracking the effectiveness of social services. The Productivity Commission’s inquiry into social services, and the move towards more outcomes-based funding, shows that success matters. Social services should not be able to get away with enjoying long term contracts, without any proof that they are achieving what they say they are going to achieve. Measurements of effectiveness and efficiency are not only important for ensuring taxpayers are getting value for money, but they also ensure that those receiving the services receive the best possible care.

In Hong Kong, while social service providers (mainly contracted NGOs) have KPIs to meet, there is little incentive to go above and beyond that. There is also little competition between providers, so there is little way of measuring whether an alternative provider could do better. In fact, some of the experts we talked to in Hong Kong freely admitted that the social services were not particularly effective or efficient, and that those receiving the services had low expectations of quality.

The third thing to (tentatively) celebrate is our KiwiSaver scheme. I say tentatively because it is controversial among economists. It is still too early to draw definitive conclusions on its effect on savings behaviour, its effect on lower socio-economic groups, and its effect on post-retirement living standards. However, the contributory nature of the scheme was of interest to the experts we talked to in Hong Kong, as the government is undergoing its own inquiry into retirement savings.

Finally, we should celebrate the fact that New Zealand’s housing crisis is completely artificial. It can be solved, and ever-rising house prices are not a natural law. In contrast, Hong Kong’s housing crisis is due to the fact it is literally running out of land to build on. We don’t have that problem. Less than 1% of our land is built upon, including landfill and motorways (according to Landcare, as of 2013). To read more about how homes can be made affordable again, check out the Initiative’s work on housing here.

There is a lot New Zealand is getting right in the way of welfare, yet some of our most effective policies still face fierce opposition. There are also a lot of things that could be improved, which will form the basis of the policy recommendations in the Initiative’s upcoming report on welfare.

Bryce and I received the best possible hospitality from the experts we visited in Hong Kong. We can only hope to return the favour, as New Zealand’s welfare system has the potential to become an international exemplar.